Defend Trade Secrets Act Litigation in Federal Courts

As regular readers know, the Defend Trade Secrets Act of 2016 is one of the biggest developments in the world of qui tam / whistleblower law from this past year. What makes it an important development to the world of qui tam / false claims act litigation is its immunity provisions for whistleblowers who remove documentation from their place of employment to support thier cases.

The DTSA, with its immunity provisions, was signed into law in May of this year, and as we close out the year cases concerning the immunity provisions are beginning to filter in. The reported decision so far, in my opinion, shows us some important things, but nothing we didn’t already know. Mainly, being a whistleblower is not without risks.

Unum Group v. Loftus — the first immunity case concerning documentation of a case

Just in time for the end of the year, we have an unpublished decision from the federal District Court in Massachusetts, Unum Group v. Loftus, 2016 WL 7115967 (D.Mass., 2016). Plaintiff brought this case against its former employee after he was seem — on video no less — removing multiple file boxes, shopping bags and briefcases full of documents from his employer’s facility after normal business hours and without authorization. This apparently happened at least two different times. When a corporate security official called him to ask him what he had been doing removing the documents and materials, he refused to answer questions about it.

Right after he hung up the phone, he was seen — again, on video — leaving the office with a laptop and returning without the laptop. After he apparently refused to return any of the documents or the laptop, Unum filed a Complaint against him in U.S. District Court alleging that Loftus misappropriated protected information.

Loftus filed a Motion to Dismiss the Complaint, asking the Court to dismiss Unum’s trade secret claims on the grounds that he gathered the and removed the documents from Unum to report and investigate a violation of law. He was, he argued, immune from any liability for trade secret misappropriation pursuant to 18 U.S.C. § 1833(b), which as readers of this blog know, shields individuals from liability under any federal or state trade secret law for disclosure of a trade secret made “in confidence … to an attorney … solely for the purpose of reporting or investigating a suspected violation of law.”

Conclusion

Naturally, of course, the District Court ruled that this was not an appropriate grounds for a Fed. R. Civ. P. 12(b)(6) motion to dismiss. That makes sense, because the DTSA is an affirmative defense to a claim of trade secret misappropriation and affirmative defenses are almost never appropriate for decision under 12(b)(6). As it turns out, I happen to agree with the District Court.

As I have been saying here for several years now, documentation of a qui tam case is not to be taken lightly by a potential relator. Moreover relators should use common sense and be discreet. There is, in my experience, never a reason to remove “multiple file boxes, shopping bags, and a briefcase full” of documents, and while that is especially true in this day and age of digital information, even in the days of paper it would be absurd to remove so much information…of course, no one should ever truly remove any documents from thier employment, but that is another topic for another day.

I wish Mr. Loftus well, but he has made his bed and now, I fear, he will have to lay in it.